Target and Walmart both opened in 1962, and they’ve been going mano a mano ever since. Now they’re joined together in a battle against a nationwide scourge: inflation, which they helped stoke. 

On Monday, big-box retailer Target lowered prices on 1,500 grocery items — with thousands more on the way — in an attempt to both lure back customers put off by inflated costs and keep pace with lower-cost rivals like Walmart. 

Keeping Up with the Waltons

April’s consumer-price index report showed that while inflation is still very much a problem for the American consumer, it’s cooling slightly with the annual rate falling to 3.4%. In response, President Joe Biden urged the country’s grocery stores to lower their prices further — and apparently the message was heard. It just so happens to dovetail nicely with the companies’ own self-interest.

Walmart, the nation’s largest retailer and employer, reported impressive first-quarter earnings last week with revenue up 6%, thanks to more budget-friendly prices. Target, which provides a somewhat more upscale shopping experience, looks to be playing catch-up:

• Starting this week, Target plans to eventually cut prices on 5,000 grocery items over this summer ranging from essentials like milk, fruit, diapers, and pet food to more name-brand products like Clorox and Prime, the energy drink from YouTuber Logan Paul. Target says it intends to “collectively save consumers millions of dollars.”
• Target reports its earnings on Wednesday, and the company has surpassed earnings-per-share expectations for five straight quarters. However, in 2023, sales and total revenue decreased 1.7% and 1.6%, respectively, from a year earlier. And it expects comparable sales to fall 3% to 5% in the first quarter.

Self-Control and Retail Therapy: Hit by inflation and high interest rates, consumers are becoming more particular with their spending habits, according to CNBC. Weaker-than-expected earnings reports from McDonald’s, Starbucks, and Home Depot suggested people are cutting back on their Happy Meals, Frappuccinos, and home renovations. Meanwhile, they’re still shelling out for Sweetgreen veggie bowls and international flights on Delta Airlines at an impressive rate. 

Also, working from home changed our retail habits, with many of us overindulging in online shopping in between and sometimes during Zoom calls. The Wall Street Journal reported that research from Stanford University, Northwestern University and the Mastercard Economics Institute estimates that WFH may have resulted in Americans spending $375 billion more than they might otherwise have last year. Just remember to record your next all-hands meeting as you browse for a new summer wardrobe and generic wall art.

Did a generic company just get an “Advance to GO” card in the new weight loss pharmaceuticals gold rush? 

As Novo Nordisk and the other freshly minted kinds of weight-loss drug companies struggle to keep pace with demand, telehealth firm Hims & Hers announced Monday it’s offering a generic version of a GLP-1 injection at a radically reduced cost. Consumers have something of a legal loophole to thank.

Compounding Interest

Popularity can be a double-edged sword. For Novo Nordisk, it’s meant seeing both of its Wegovy and Ozempic drugs stuck on the FDA’s official shortages list since last May. And one pharma company’s crisis is another’s opportunity. With FDA-approved GLP-1 drugs in short supply, the door has been open for competitors to enter the market with a “compounded” version, or drugs that mix certain ingredients to create a copycat version of an already approved drug. In short, it’s allowed Hims & Hers to create a back-door offering of a generic weight loss drug far before the patents of Novo Nordisk and Eli Lilly expire.

That’s great news for the consumers who can’t get a brand-name version, either because of the shortage or the exorbitant price tag:

• Wegovy, Ozempic, and Eli Lilly’s Zepbound are so costly that some insurers are nixing coverage entirely — a month’s worth of Wegovy injections costs around $1,350 without insurance, about on par with Zepbound.
• Hims & Hers, meanwhile, will offer their generic copycat for just $199 per month, and an oral medication starting at $79 per month. For now, the drugs won’t be available in all 50 US states.

Copycat Scratch Fever: Compounded drugs don’t need FDA approval, making Hims & Hers offerings a play-at-your-own-risk deal, hopefully with the advice of your doctor. Hims & Hers also isn’t the first firm to step into the weight loss compounded drug market, though the FDA and state health departments don’t closely track compounded drug markets either, making it difficult to know just how many Americans are taking discount Ozempic. Either way, it’s not exactly new territory for the telehealth firm. In December, the company began prescribing off-label versions of closely related diabetes and alcohol-use disorder drugs, and CEO Andrew Dudum said the division is now the fastest grower, expected to generate $100 million in revenue by next year. Investors popped with excitement on Monday, sending Hims’ share price, already up 50% year-to-date as of Friday, up nearly 30%. As usual, helping others skinny down is a great way to fatten up your bottom line.

It’s a Monkey’s Paw parable straight out of Tales from the Crypt(o). 

Less than nine months after Grayscale Investments won a lengthy court battle against the SEC to start offering a spot Bitcoin ETF to the public, its CEO has departed and its flagship fund is losing ground to several rivals.

Fee-Fi-Fo-Fudge

The early days of crypto were heady times for Grayscale. Before the legal victory to transition to a spot Bitcoin ETF, its Grayscale Bitcoin Trust had a first-mover advantage as one of the few ways that investors could bet on Bitcoin without having to buy the cryptocurrency itself. But the idea of a spot ETF — with funds tying prices to Bitcoin they actually own and offering easier redemptions for investors — was so straightforward and appealing that it made sense to force the issue in court. To be fair, the SEC has long been suspicious of crypto, not the least because security issues like this seem to happen all the time.

Unfortunately for Grayscale, that first-mover advantage disappeared quickly:

• The Wall Street Journal said Monday investors have pulled more than $17 billion since the conversion to an ETF in January. Meanwhile, nine new Bitcoin ETFs, including those from BlackRock and Fidelity, have seen inflows of more than $30 billion.
• It seemingly all comes down to fees. Grayscale’s ETF charges a fee of 1.5%, while many of its rivals have continuously slashed fees down to almost nothing.

CEO Michael Sonnenshein has stepped down after about three years on the job. The WSJ said sources disclosed that a search for a new CEO had begun in late 2023 but wasn’t related to the fund’s performance or outflows. It also reported that Sonnenshein had previously said he wasn’t worried about the investor exodus, but maybe he should have been?

Legal Loophole: The irony of the fee war is that Bitcoin ETF providers can technically charge high fees without regulatory oversight because they’re not considered providers of “normal securities” and thus not covered by the fiduciary-duty obligations of the Investment Company Act of 1940, as a recent Barron’s piece pointed out. Fortunately, investors are solving the problem themselves.